Company Customer

Insights Insights
Market
Insight
Competitor Segmentation
Insights Insights

Opportunity Assessment
& Targeting

Strategy Objectives & Strategic Focus

Development
Positioning

Program Value Creation, Value Delivery,

Design Value Communication, & Value Extraction
Macro-
Analysis
Micro-
Budgeting
Analysis

Execution
Competitive Analysis Process

Competitive set definition

Intelligence Gathering

Intelligence analysis

Competitive predictions

Competitive actions/reactions
Competitive Analysis Process

Competitive set definition

Intelligence Gathering

Intelligence analysis

Competitive predictions

Competitive actions/reactions
I. Identify Competitive Set

 Judgment-based identification: More subjective, but inexpensive and future oriented

 Data-based identification: More objective, but present-oriented and potentially expensive

 Form strategic groups based on similar characteristics, similar assets/skills, and similar

competitive strategies

 Focus on those who--based on importance of market to you and importance of market to

them--pose greatest threat, now or in foreseeable future

Tool: Competitor Landscape Analysis

Current Probable Potential

A B C

Direct
competitors

D E F

Indirect
competitors
Competitor Landscape Analysis
HP Personal Computers
Cur. Probable Potential
A B C

Direct Dell Lenovo Microsoft

competitors IBM Samsung

Sony
Apple

D E F

Indirect PDAs Mobile phones ?

competitors Blackberry
Portable media players
Tool: Substitutes Threat Assessment

Customer group:

Functions and Benefits Potential Substitutes

“What does my product help my “What are the other ways to fulfill the same functions or obtain the same
customers do? What benefits do they get benefits?
from my product?”
Substitutes for FedEx Overnight Delivery

Customer group: Professional practices

Functions and Benefits Potential Substitutes

“What does my product help my “What are the other ways to fulfill the same functions or obtain the same
customers do? What benefits do they get benefits?
from my product?”

Deliver non-sensitive documents Other OD US Postal Fax Email Web posting

services Service
(e.g., DHL)
Deliver sensitive documents Other OD USPS X Encrypted
services Email X
Certified mail
Share datasets Other OD USPS X Email Web posting
services Certified mail FTP
Deliver parcels UPS US Postal X X X
Service
Substitutes for Unicef Greeting Cards

Customer group:

Functions and Benefits Potential Substitutes

“What does my product help my “What are the other ways to fulfill the same functions or obtain the same
customers do? What benefits do they get benefits?
from my product?”

Feel socially responsilble Other OD US Postal Fax Email Web posting

services Service
(e.g., DHL)
Keep in touch with friends Other cards E-mail Phone call Visit …

Congratulate on happy news Other cards Phone call Visit Send gift or …
flowers
Express support or sympathy Other cards Phone call Visit Send flowers …
Empirical Approaches

Identify competition based on what customers choose or what they

perceive. Insist on usage context.

Judgments of substitutability (survey/interviews):

“It’s 5:30 PM on Friday. You have a confidential price list to send to one of your

major customers located in another state by Monday morning. Suppose that, for

some reason, FedEx is not an option. What would you do?”

Tool: Substitutability Worksheet

Order Customer 1 Customer 2 Customer 3 Score

1 10

2 8

3 6

4 4

5 2
Assessment of FedEx Substitues

Order Customer 1 Customer 2 Customer 3 Score

1 DHL UPS DHL 10

2 UPS AIRB AIRB 8

3 EMAIL DHL UPS 6

4 FAX EMAIL EMAIL 4

5 Phone FAX FAX 2

Competitive Analysis Process

Competitive set definition

Intelligence Gathering

Intelligence analysis

Competitive predictions

Competitive actions/reactions
II. Intelligence Gathering

 Consider broad list of intelligence sources

 Be efficient in intelligence gathering

 Beware of legal and ethical hazards

 Filter for reliability

 Intelligence gathering is a “two-way” street: Take appropriate protective measures

Sources of Competitive Intelligence
 Competitors’ annual reports  Banks
 Competitor’s speeches and public  Ad agencies
announcements  Independent truck fleets
 Competitor’s products  Retailers
 Competitor’s web site  Trade magazines
 Competitor’s customers: purchasing agents,  Professional meetings: displays, brochures, scientific
engineers, corporate officers papers

 Employment ads and head hunters  Own personnel: executives, sales force, engineers
 Securities and Exchange Commission filings  Industry observers: consultants, stock analysts
 Patent filings in US & overseas  Newspapers (especially local)
 Government contract administration  Creative observation
Efficient Intelligence Gathering

Assess what is already

known internally

Define what you

expect to learn

Set priorities

Verify “Who else

needs it?”

Monitor competitor’s
transactions
Intelligence Filtering

 Cross-validate

 Pilot-test external sources

 Factor in ambiguity & reversibility

 Factor in trustworthiness of context

 Code for reliability:

rumor=1;  reliable = 2; fact = 3

Competitive Analysis Process

Competitive set definition

Intelligence Gathering

Intelligence analysis

Competitive predictions

Competitive actions/reactions
III. Principle of Intelligence Analysis

 Benchmarking

 Trend analysis

 Elaboration

 Decomposition

 Holistic interpretation
Tool: MAM (MBA Programs)

Harvard Duke Columbia Stanford

Criteria Weights
ratings ratings ratings ratings

Brand Name 15% 10 6 8 10

Location 30% 7 4 10 6

Placement record 25% 9 7 8 8

Curriculum 10% 9 7 6 6

Latest Rankings 10% 9 7 7 6

Student profiles 10% 7 8 8 7

Holistic Interpretation
Help wanted ad:
C seeks Sales force:
experienced C is opening
programmers sales offices

Rumor:
Multiple UCC
Prospects
filings for major
approached by C
equipment
for test marketing
Competitive Analysis Process

Competitive set definition

Intelligence Gathering

Intelligence analysis

Competitive predictions

Competitive actions/reactions
IV. Competitive Prediction

 Tool: Role playing (e.g., AT&T vs. MCI)

• Start early
• Spell out rules of the game
• Beware of false-consensus; bring in “neutral” parties
• Include all key players
• Factor in your expected actions
Tool: Time-lining
(Predicting new plant operation)

Decision to build

Site selection

Env. Imp. Statem.

Design work

Site construction

Equip. purchase

Equip. install

Hiring
Predicting Competitive Attitudes

Favors cooperative Favor competitive

Determinants
behavior behavior
Industry concentration High Low

Fixed cost Low High

LT implications of early dominance Low High

Growth High Low

Product differentiation High Low

Potential for secrecy Low High

Cyclicity/seasonality of demand Low High

Retaliatory power of leader High Low

Social relations among executives Good Poor

Excess capacity Low High

Competitive Analysis Process

Competitive set definition

Intelligence Gathering

Intelligence analysis

Competitive predictions

Competitive actions/reactions
V. Competitive Actions/Reactions

 Formulate competitor-specific strategies

 Prepare competitor response profiles

 Play games: Select best course given

competitor’s probable actions and reactions

 Flesh out response options

 Change the rules of the game if unhealthy

Tool: Competitive Summary
Assessment Template
Market Share Positions Future Threats &
Relative Current
Competi- Total Seg- Seg- Seg- Seg- Relative Objectives Opportu- Proposed
Weak- Objective
tors Strengths & Probable nities Strategy
Market ment 1 ment2 ment 3 ment 4 nesses & Strategy
Strategy Presented
Cur. Cur. Cur. Cur. Cur.

Prev. Prev. Prev. Prev. Prev.

Cur. Cur. Cur. Cur. Cur.

Prev. Prev. Prev. Prev. Prev.

Cur. Cur. Cur. Cur. Cur.

Prev. Prev. Prev. Prev. Prev.

Cur. Cur. Cur. Cur. Cur.

Prev. Prev. Prev. Prev. Prev.

Tool: Game Theory
Competitor’s possible
courses of actions

Outcome for
competitor
Your
possible
courses
of actions
Outcome for
you
“Prisoner’s Dilemma”
B
VCU = 1,000
TFC = 10,000 Lower: Profit
Maintain:
Total market size = P=1,800 P=2,000
100
50 (30,000) 20 (10,000)
Lower:
P=1,800 A B A B
Sales
A 50 (30,000) 80 (54,000)

80 (54,000)
50 (40,000)
Maintain:
P=2,000 A B A B

20 (10,000) 50 (40,000)
Effects of Differentiation
B
VCU = 1,000 Lower: Maintain:
TFC = 10,000 P=1,800 P=2,000
Total market size = 100

50 (30,000) 40 (30,000)
Lower:
P=1,800 A B A B
A 50 (30,000) 60 (38,000)

60 (38,000) 50 (40,000)
Maintain:
P=2,000 A B A B

40 (30,000) 50 (40,000)
Influencing Competitors

 Send market signals

 Play “tit-for-tat”
• Not unnecessarily aggressive
• Firm
• Clear
• Avoids over-reaction
• Forgiving
 Don’t be too greedy
• Hide under dominant brand’s umbrella
• Limit pricing
 Educate
Market Signaling

 Form
• Prior announcement
• Announcement after the fact
• Discussion of own moves
• Public discussion of industry
 Purpose and Content
• Preemption
• Communicate strategic advantage,
• Promote coordination
• Threat
• Minimize provocation
Flesh Out the Response

 Should we respond?
 How show we respond?
• What type?
• How aggressively?
• In kind or not in kind?
• In which market or territory?
 When should we respond?
 For how long?
Example: Response Options toward New Entrants

Source: Gatignon,
H. & D. Reibstein (1997)
 Two types of competitor identification methods
• Structured judgment

• Empirical identification based on actual problem-

solving and choice

 Numerous sources of competitive intelligence. Be efficient in

searching them: set expectations, specificity, priority, etc.

 Important step in competitive analysis is intelligence filtering

 Intelligence gathering does not mean breaking the law
 Intelligence gathering is a two-way street. Perform a risk

analysis. Make protective measures simple

 Key analysis principles: (1) elaborate, (2) use benchmarks,

(3) decompose, and (4) look for the big picture

 Prediction technique: Role playing along specific rules

 Don’t just react to competitor moves, anticipate them

 Don’t just anticipate competitor moves, try to dictate them

 Use game theory as a tool to model competitive interactions

 Strategies for playing competitive game:

• Tit-for-tat

• Competitor education

• Changing the rules

 Always compute the break-even before changing price as

a competitive move

 Make sure that you are indeed playing the same game,

that is, playing by the same rules